March Is the Best Time To Set Your Summer Vacation Budget — What You Need To Know
Although summer may seem far away, now is actually the best time of year to start saving and budgeting for your summer vacation, according to financial experts.
“Starting to save before the summer season arrives gives you the opportunity to build up your savings over a longer period of time,” said Amy Richardson, CFP with Schwab Intelligent Portfolios Premium. “This reduces the impact on your short-term cash flow and helps ensure you don’t feel strapped to try to save quickly. It also takes the worry and stress out of wondering how you’ll come up with the funds. As an added bonus, booking early usually provides an opportunity to lock in your vacation at a lower price.”
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Ready to start financially planning for the summer vacation of your dreams? Here’s how to get started.
Calculate How Much You Can Afford To Spend on a Vacation
The first step in planning your summer vacation is figuring out how much you can realistically afford to spend.
“When calculating your vacation expenses, make sure you consider them in relation to your overall budget and take-home pay,” Richardson said. “A general rule of thumb is that you shouldn’t incur debt that you can’t easily pay off to take a vacation.”
When you’ve decided on a trip that you believe is in your budget, start pricing it out to see how much you will need to save for it.
“Price out expected costs for flights, hotels, dining, transportation, excursions and souvenirs,” Richardson said. “Once you have an idea of the total cost, divide it by the number of weeks you have until the vacation so you know how much you will need to put into your travel fund each week. Doing this will help keep you focused on your goal, and knowing you have the finances in order will allow you to get excited about the trip instead of feeling stressed.”
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Start Building Your Travel Fund
Putting aside money every week or paycheck for your travel fund is easier said than done, but it’s doable if you stay focused on your goal. Richardson recommends the following tips to build up your summer vacation savings.
“My No. 1 tip (and something I do for myself) is to set up a separate travel fund account,” she said. “Once you have an account set up, I suggest starting a recurring transfer into the account each month. If you get paid every other Friday, set up a transfer for Friday afternoons to put money into your travel account. Automatic transfers eliminate the risk that you’ll forget a payment or accidentally use the funds for something else.”
You may even consider contributing to this fund year-round.
“If travel is an important goal for you, you might consider consistently funding your travel account, even when you don’t have a specific vacation planned,” Richardson said. “That way, you always have funds set aside for when you do eventually want to plan a getaway.”
To make sure you’ll have enough in your travel fund to take a vacation by summertime, you may need to make some sacrifices in the short term.
“The bottom line is that saving for a vacation requires discipline,” Richardson said. “You may have to cut back on some expenses today and start putting those funds toward that summer vacation, but it will be worth it in the end.”
Stick To Your Budget When It Comes Time To Book
When you’re actually ready to book your trip, try to only spend what you have in your travel fund.
“Prioritize what is most important to you about a vacation,” Richardson said. “What are the things you must have versus those that would be nice to have? What do you want to splurge on and what can you save on? For example, if you want to spend more on experiences, you could consider a more affordable hotel as a compromise. If a luxury hotel and the amenities that come along with it are most important to you, perhaps you scale back on excursions or expensive meals. While we might like to have a luxury hotel, divine meals and out-of-this-world experiences, the reality is that we often can’t afford everything all at once.”
To help you stick to your budget, it’s best to be as flexible as possible.
“For example, if you are open-minded and willing to be flexible with the destination, there are several online resources you can use to find a slightly less popular location that might not get as pricey as some of the more sought-after summertime destinations,” Richardson said.
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